Inflation ticked up in Europe in May. That likely won't stop a central bank rate cut next week
Inflation ticked up to an annual 2.6% in Europe in May
FRANKFURT, Germany — Inflation ticked up to an annual 2.6% in Europe in May, according to official figures on Friday. That's more than expected as a painful spike in consumer prices takes its time to fade away.
It's unlikely to stop the European Central Bank from making a first interest rate cut next week — and moving ahead of the U.S. Federal Reserve in lowering borrowing costs for businesses and consumers.
Still, the higher inflation number makes it more likely that a first ECB cut next week won't be immediately followed by another one at the July meeting.
The official figure for the 20 countries that use the euro currency compares to 2.4% in April, according to European Union statistics agency Eurostat. Markets had expected 2.5% for May.
The ECB would be out in front of the U.S. Federal Reserve, which has held off on cutting rates because of more persistent inflation in the US. That would be a switch from the hiking cycle, when the ECB lagged the Fed in raising rates as inflation broke out across the world’s developed economies. U.S. consumer inflation ran at a seasonally unadjusted annual rate of 3.4% in April.
In this case, the ECB is facing a different economic situation, since it was hit harder by an energy price spike, which has now faded. Inflation in the U.S. has been fed by higher stimulus spending during and after the coronavirus pandemic and by more robust growth, putting the Fed in a different situation.
Inflation spiked into double digits in Europe after Russia cut off most pipeline supplies of natural gas over its full-scale invasion of Ukraine, and as the rebound from the pandemic clogged supply chains of parts and raw materials. Inflation has
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